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Question 1 (22 marks) Company A issued $3.12 million of 7-year 3% bonds at $2,755,244....

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Accounting

Question 1 (22 marks)

Company A issued $3.12 million of 7-year 3% bonds at $2,755,244. The bonds were dated January 1, 2021 and pay interest semi-annually on January 1 and July 1. The market rate of interest was 5% for these bonds. Company A has a December 31 year-end.

  1. Were the bonds issued at a premium or a discount? Why? (2 marks)
  2. Prepare an amortization schedule for the first three interest payments. (12 marks)
  3. Prepare the journal entry to record the first interest payment on July 1, 2021. (3 marks)
  4. Prepare the journal entry to record the accrual of interest on December 31, 2021. (3 marks)
  5. Prepare the journal entry to record the second interest payment on January 1, 2022. (2 marks)

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